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Permadeficit on the Potomac

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  • Tue, Feb 02, 2010 - 01:52am

    #11
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    Re: Permadeficit on the Potomac

[quote=specie]

i’m expecting fits of reflation/inflation/stagflation/bullshitation

[/quote]

Hey, I’ve enriched my vocabulary!:)  Good laugh, specie.

  • Tue, Feb 02, 2010 - 02:22am

    #12
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    Re: Permadeficit on the Potomac

[quote=Romans12.2]

But where you got me is paying down our debt….still have a 250 mortgage.  Why should we pay this down/off?

[/quote]I don’t know if YOU should. I’m just saying what we did.Wink

We downsized, went from a 4k sq foot home in a sub division to a mountain retreat that is 1800 sq foot. My thoughts are: We are going into GDII. The only chance of avoidance is some miracle battery, some miracle new energy or a war or disease so horrific that there is a massive population reduction and thus no more stresses on resources.

Since I don’t see any miracles and all I see now are small “resource grab wars” I’m pretty confident GDII is still well situated on the horizon that we are heading for.

Face it, the banksters’ derivatives blew up the economy. There was and is a lot of fallout from that. The economy itself was a sham, in 2008 for instance, people spent 9 billion borrowed dollars to drink 4 dollar coffees at Starbucks. That is a sham economy. A fake wealth.

I don’t think we are going to be seeing that.

Therefore I expect a lot more fallout, a lot more job losses and a lot of systemic risk.

Personally I want to be able to get by on almost nothing. Especially if the currency goes to heck in a handbasket – and I myself think it will. I suspect CM and MH and others are right in that the bond market is the next bubble. One thing I would not want is debt that is not fixed.

Hope that helps, best of luck.

  • Tue, Feb 02, 2010 - 02:31am

    #13
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    Re: Permadeficit on the Potomac

good advice…you are so right.  My neighbors are still buying those $4.00 lattes in my small town…idiots all.

We are looking at a 20acre very rural wooded site with a stream, has old hunting cabin with no bathroom.  Hard to imagine leaving my full prepped 4 acre home in small town….but we are 40 miles outside of Detroit!  Our only fear is that we stock our property up North, only to wait to long to Bug out.  We can’t leave now…business is good.

  • Tue, Feb 02, 2010 - 02:52am

    #14
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    Re: Permadeficit on the Potomac

Davos,

Thanks for the zerohedge link.  Between the SEC ruling on MMFs and the talk of such controls on our IRAs/401Ks, I am pulling the plug on my IRA.  I have been agonizing over this for almost a year.  I calld Fidelity last week to get the partriculars on withdrawals and this week I am searching for local banks fo open the accounts to transfer my funds to.

It really is saddening and angering to me that I am having to consider such actions when I feel that the government is willfully causing our destruction.  At least I am glad that I have found this and several sites over the past 18 months that have opened my eyes to reality.

  • Tue, Feb 02, 2010 - 03:27am

    #15
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    Re: Permadeficit on the Potomac

[quote=MarkM]

Davos,

Thanks for the zerohedge link.  Between the SEC ruling on MMFs and the talk of such controls on our IRAs/401Ks, I am pulling the plug on my IRA.  I have been agonizing over this for almost a year.  I calld Fidelity last week to get the partriculars on withdrawals and this week I am searching for local banks fo open the accounts to transfer my funds to.

It really is saddening and angering to me that I am having to consider such actions when I feel that the government is willfully causing our destruction.  At least I am glad that I have found this and several sites over the past 18 months that have opened my eyes to reality.

[/quote]It hurt to pay the taxes, I was somewhat lucky to spread it out over years Dec/Jan but I have no regrets, something is better than nothing. I myself don’t trust banks. There are some good bullion volts. Best.

  • Tue, Feb 02, 2010 - 03:59am

    #16
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    Re: Permadeficit on the Potomac

Davos wrote:

“…I can’t and would not give financial advice. I could be 100% wrong a lot can happen. But ALL my money went to paying down as much debt as we could and a huge chunk went into PMs and we stocked up on food and the rest. I was able to close all our 401ks and IRAs…”

Well said, you don’t have to give “advice” as recent history has shown that your actions were smart.  As far as cashing out the 401ks and IRAs we may all be following your lead as it looks like they will soon be raiding the mother lode; retirement accounts.

Another thing that is worth considering is the likelihood that the currency will continue dropping in value.  It may be that by decoupling from the dollar (e.g. – PMs and other currencies) the principal on existing “dollar loans” will effectively be reduced in real value.  I guess it depends on the interest rate of open loans versus the rate of dollar devaluation.

Another fantastic article machinehead!  Please keep them coming,

Larry 

  • Tue, Feb 02, 2010 - 01:07pm

    #17
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    Re: Permadeficit on the Potomac

[quote=Davos]

I suspect CM and MH and others are right in that the bond market is the next bubble.

[/quote]

Last night I read that another commentator I respect, Michael Belkin, thinks bonds are in a bubble. When the president announces ‘four percent forever’ (that is, permadeficits equaling 4% of GDP), lenders are going to want protection against the rising risks of inflation and default.

How bad could it get? Dr. John Hussman forecasts that, thanks to the Fed’s recently doubled balance sheet, the price level will double during this decade. By the Rule of 72, this amounts to about 7% annual inflation, on average. So if the real interest rate is held at zero, rates need to rise to a nominal 7%. If the traditional 2 to 3% real rate of interest is re-established, then the nominal interest rate could reach 10%.

Consider the implications. The president projects federal debt of $18 trillion a decade from now. At the current 4% yield, that would mean annual interest of $720 billion, about double what we’re paying now. But at 10%, annual interest would be $1.8 trillion — nearly half of this year’s budget.

Obviously, Usgov cannot possibly devote half its budget to payng interest. Equally obviously, it will simply print the money to pay the interest, by having the Benny Bubbles Fed buy new Treasurys with thin-air currency, in order to pay the interest on the old ones.

All of this rhymes with Dr. Martenson’s ‘tidal wave in a stadium’ scenario. Namely, it’s not a linear process. The rise in interest rates starts slowly, then feeds on itself. From a technical analysis point of view, upside resistance is at 20%, a peak which has been touched three times previously in U.S. history. If 20% is exceeded, terminal hyperinflation lies ahead within days or weeks, to be followed by a currency replacement.

My best guess of a time frame for these events is 2013-2014, after a big surge of deficit-financed election spending in 2012 to elect another corpgov populist impersonator, such as the Massachusetts Marlboro man. What can Brown do for you? Mwa ha ha ha … Mistuh Pretzeldent … ah need me a JOB!

  • Tue, Feb 02, 2010 - 01:30pm

    #18
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    Re: Permadeficit on the Potomac

Another fantastic article machinehead!  Please keep them coming,

 

+1 & 2013/14 you’re more “optimistic than I Cool

PS Thought this was substantive 

  • Tue, Feb 02, 2010 - 09:09pm

    #19
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    Re: Permadeficit on the Potomac

hi romans

 

we must be nearly neighbors – i am in commerce twp.  Yes. tough question.  too near a deadly city like detroit.  but how far up north does a person need to go?

  • Tue, Feb 02, 2010 - 10:58pm

    #20
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    Re: Permadeficit on the Potomac

[quote=specie]

we must be nearly neighbors – i am in commerce twp.  Yes. tough question.  too near a deadly city like detroit.  but how far up north does a person need to go?

[/quote]

On the other hand, it seems like Detroit and it’s surrounding communities are seeing an exodus of people as they go elsewhere for better prospects.  If most of the wealth goes away, it stands that most of the criminal types who are able to migrate will follow the wealth to other states in search of better pickings.  In such a case it might turn out that living 140 miles away from Washington DC (where a lot of new gov’t and defense jobs are migrating to) will be more dangerous than living 40 miles away from Detroit.  Just a thought.  Perhaps the thing to be particularly concerned about is the state government’s future inability to fund some very basic services (roads, schools, utilities, etc.); in Michigan’s case that seems a very likely scenario, and may have a bigger impact on the average household in your area than crime or civil unrest.  I guess it all depends on how bad you realistically think the local situation will get, and whether we continue to see a slow collapse or instead experience a fast collapse.

– Nickbert

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